Asset Backed Contributions
Using corporate assets to efficiently fund pension scheme deficits.
Asset Backed Contributions (ABCs) utilise group assets and can provide a means of immediately funding a significant amount of pension deficit, whilst preserving corporate cashflow.
In an environment of high pension deficits and a renewed focus on cost reduction, these solutions are particularly relevant as companies seek efficient ways to fund increased deficits.
ABCs typically work by the company and the pension scheme establishing a partnership into which group assets (e.g. property, brand, loan notes, receivables, stock) are transferred. The pension scheme holds an interest in the partnership that delivers an income stream and is collateralised by assets that have value independent of the company and are ring-fenced for the benefit of the scheme.
The key advantages are:
Cash preservation – ABCs enable cashflows to be spread over a longer period than a typical recovery plan. Upfront tax relief may also be available.
Immediate deficit reduction – ABCs enable an immediate improvement to the cash funding position.
Overfunding protection – ABCs can be designed to reduce the risk of paying too much into a pension scheme.
Security of member benefits – Scheme trustees gain access to a valuable corporate asset, with a value independent of the company’s circumstances.
Control – The company maintains operational control of the underlying corporate assets
For more information please contact the asset back contributions team